To Determine the Fixed Rate on a Swap,you Would

question 10

Multiple Choice

To determine the fixed rate on a swap,you would

• A)use put-call parity
• B)price it as the issuance of a fixed rate bond and purchase of a floating rate bond or vice versa
• C)use the same fixed rate as that of a zero coupon bond of equivalent maturity
• D)use the continuously compounded rate for the shortest maturity bond
• E)none of the above

Understand the principles of offer, acceptance, and the formation of bilateral and unilateral contracts.

Identify the requirements for valid acceptance and the effects of various acceptance methods.

Comprehend the factors affecting the enforceability of agreements not in writing.

Analyze the role and characteristics of formal contracts such as contracts under seal and letters of credit.

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.

Variable Cost

Costs that change in proportion to the level of activity or volume of production in a business.

Contribution Margin

The amount by which the unit selling price exceeds the unit variable cost.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and insurance premiums.